jury so i'm going walk through those, the first finding indicated that the jury couldn't identify any government investigations tracking surcharges, we partially disagreed with that finding i think unbeknownst so the grand jury, we had commenced our process of na process of compiling that which we've since issued in our report in august, so we have done that. moving to the fourth finding, the grand jury indicated that the city didn't have a plan nor sufficient staff at olse to audit surcharge compliance with the regulations. the olse's response in summary is that we absolutely intend to at least facially respond to as has been indicated already, employers are going to be required to report to us their

surcharge data, how much they collect in surcharges, whether or not that's more or less the amount they spend in health care, those who report to us affirmatively that they have collected more on surcharges than they spent on health care, we will enforce the provision that they be required to spend that money irrevocably on health care, we intend to do that and have a plan to do that. at the same time, i think it's also right to say we do not have the resources to proactively investigate or to on our own velysing report to they have collected more on surcharges than spent on health care. fnt supervisor compos? >> thank you very much, mr. gold berger and -- gold berg, thank you to your and your staff with the limited resources you have, do you verify the information that's

provided to you? >> in general with the reports that come in every year as you know, supervisor compos, we're statute toiler obligated, we issue reports each year on the data that is self-reported by the employers, we do not verify the data before issuing our reports. >> and following the amendment that was passed, was there any plan or strategy to begin to audit and verify that data? >> well, as you know, the amendments are effective january 1, 2012, so in early 2013, we're going get the first batch of data from employers about the surcharge information they imposed in 2012, i think it's to be determined whether or not we're going have any ability to go beyond looking at the information provided to us. realistically based on staffing, i think the intention or expectation is that we're going to take the data at face value, i think it's also fair

to say though that when we do our normal investigations of employers, as a general matter, we're investigating employer compliance based on complaints that are brought to us by employees and when when we do those normal investigation, we'll dig into the details of any surcharges. >> just a final request related to this point, are there employers that do not turn in information? >> yes, and that's moving ahead a little bit, but with respect to the 2011 report that we just issued, that was information related to us from many employers, that was the number of the cutoff date up to the report, there are numbers that trickled in, the exact numbers of employee that is are covered

by the ordinance and thus required to report to us, our best estimates working with the treasurer and tax collector's office is that we receive about 80 or 90 percent of annual reporting forms. >> and what happens to those employers that do not provide that information? >> traditionally or historically, nothing. it is right that the board among the amendment that the board made that went into effect on january 1, 2012 was an increase to a penalty that is imposed upon employers that fail to submit their annual reporting form and based on that amendment to the ordinance websinger have commenced the pilot project this year where we're trying to dig into the sub s*et of employers who do not submit their annual reporting form and go back to

those employers and they have in violation, we have engaged in that on a pilot project. >> what does that mean, pilot. >> we selected a pool of 100 employers who we believed based on the data we had was based on the ordinance and were required to submit an annual report to us, we submitted them a notice that said they were required to submit the form and pay a 500 dollar penalty, we're at the conclusion of this pilot project, but approximately 30% of those in fact paid the penalty and submitted their annual reporting form, another third indicated to us that they were not required to submit the reporting form as we sort of anticipated would be the case, as you know, there's a various requirement and eligibility issues about who's required to submit the forms and we have not heard from the remaining. >> i'll let you continue,

sorry. >> it's okay. moving on to the next finding from the grand jury was finding number 5, similar to finding number 1, this indicates that businesses were not required to report or reconcile to the city their surcharges, as we've all alluded to, we did in fact collect the surcharge data for 2011, we didn't reconcile it in the sense that the amendments regarding surcharges were not in effect at that time and so we collected the 2011 surcharge data for statistical purposes only. finding number 6 indicates due to the varied wording in describing sur channeled on customer bills, the auditing of surcharges will be difficult. just to clarify, i think it's right and what we highlighted in our response is that we are going to do the absolute best we can to audit and ensure

employer compliance with that provision, it is also at the same time correct that an employer who imposes a general mandate or employer mandate surcharge, it will be at the discretion of that employer to indicate what if any portion of that surcharge was designed for health care. i will say in some respects the amendment tos the ordinance around surcharges were to combat consumer fraud and to the extent that some employers have shifted the nature of their surcharge from a health care surcharge to a more general surcharge, i think that that is a positive outcome and speaks to and addresses the possible consumer fraud there. that's finding number 6. the final two -- >> is that requirement any different than what state law already required in terms of consumer protection laws? >> you know, this is now of

course a new provision that's put directly into the health care security ordinance. i can't really speak to what consumer protection or consumer fraud provisions are in place in state law or in tortes that are permitted. >> although just to be clear, i think it's probably fair to say before the amendment that is we passed at the end of last year, there wasanted anything at city law that said to your office, you need to refer cases that you find to the appropriate authorities whether they be for criminal penalties or consumer fraud penalties so my guess is your staff is probably looking at this more seriously and will absolutely consider referral cases bh necessary? >> yes, i think that's absolutely right. >> and i want to take a moment and thank your office for the efforts you're making here. i think there's been some distortion ins the debate of this issue whether those of us who supported this amendment thinks this is a practice that

should be supported, i don't think anyone believes that if an employer say tos a consumer that money's supposed to be used for health care, if that money doesn't go to health care, that money needs to be recouped from the employer, put into health care accounts and if there is any activity that suggests that an employer's not doing that, we want your office to investigate and appropriately pursue authorities. >> thank you. moving on to finding number 8, the civil grand jury has essentially repeated a statistic that came out of our 2010 report which again is now sort of a year behind, they indicated that 62 million dollars was allocated to hra's, 12 million was reimbursed, 50 million was retained by employers, up to 50 million, those statistics are right with a couple of caveats, that spoke

to reimbursement programs, the annual reporting form didn't speak to what happened to that unused 15 million dollars, it's right that in 2010, the general practice was plans operated on a calendar year and money reverted back to employers, which has subsequently been changed, tla's finding number 8. finding number 10, the final finding that we were called upon to respond to indicated that significant number of restaurants utilizing hra's in 2010 paid out no medical expenses for their employees. the office of labor standards enforcement does not collect industry specific data when collecting our annual reporting forms nor would i know exactly what a significant number meant. what i can tell you is that the 184 employers in 2010 indicated that they did not reimburse any of the money that they allocated into these

reimbursement programs, that number was 126 employers in 2011. those are our responses to the findings. i thought i would take a few moments and summarize the findings from our report that we issued just last month. some of this area -- some of this material's been covered so i'll go through that quickly. i do want to highlight as a preliminary report, the amendments were passed last year, directed us to collect some specific data, in 2011, we collected sliekt lip different data than we collected in prior years, as indicated the report is based o on the responses of many employees, it is 80 to 90 percent of employers who were require today submit data to us, it was evenly divided

between 100 employees, so half of the respondents were between 20 and 100 respondents, half of the respondents were over half of employees, employers to 0 to 19 employees are not required to submit data to our office. in total, there was 1.2 billion dollars in health care spending on behalf of 220 thousand san francisco employees. we break that down into three general categories and these numbers were similar in percentages to what we've seen in prior years, 89% of the money goes to health insurance, 4% to have money to the city option, sort of also referred to as the healthy san francisco program x and 7% of the money went to reimbursement programs as a general category, the vast majority of that specifically to health reimbursement accounts or hra's, i think that#

indicates and shows that the vast majority of employers who provide health insurance to their workers provides the vast majority to have spending are complying with the spirit and intent of the ordinance. looking just specifically at reimbursement programs as a general category, we did see the reimbursement rate increase sleekly from 2010 to 2011, that number went from 20% to 26%, and we found slightly more employers were utilizing reimbursement programs, that was a point that's been mentioned here. that 29% of employers, up to 32% of employers were using these forms of reimbursement programs, looking just as hra's which has been the source of some policy sdrution and much of the grand jury's interest here, 20% of employers, 373 employees allocated 66 million million dollars to these

programs, 11 million dollars was reimbursed, 5 5* 5 million dollars went unreimbursed, the amendment tos the ordinance require employers who continue to utilize health reimbursement accounts to make sure that unused money is available to their workers in 201. as has been indicated, the reimbursement rate looking just at these health reimbursement accounts in 2010 was 17%t median rate was just 9%. by way of comparison as we were asked to do by the directive, the medical reimbursement accounts administered by the department of public health had a reimbursement rate of 60% in calendar year 2011, 25% in the fiscal year, i think a rep v*ent t if from the department of public health is here and can talk to those numbers in details if there are further questions. for the first time, we surveyed

the employers about whether or not they placed restrictions upon their health reimbursement accounts, just so we're all on the same page, what we mean by this is do you restrict or prohibit an employee from using the health reimbursement account for any of the category of irs recognized medical expenses and we listed the most common of those as has been indicated, 53% of the 573 employees administered placed one or more restrictions on usage of those accounts. the individual things we looked at were restrictions on health insurance, healthy san francisco participation fees, use of these accounts for dependents, use of these accounts for dental care and use of these accounts for vision care, looking individually at those five

restrictions, they placed those specific restrictions on the accounts. >> if i may. >> yes, supervisor compos? >> yes, just for purposes of information, when you find out what restrictions are placed, do you ever get a sense of why those prescribers -- restrictions put in place? why do they say, you can't use this money for health insurance? >> supervisor, i would be reluctant to speculate about the motivations of employers in that respect. i think it's certainly been true as we've discussed here that employers retain or collect unused money, and there's been some indication or some belief that some employers have an incentive to reduce usage for the purposes that they retain a greater portion

of them. >> i do have a couple of clarifying questions but i want to get back to the point of the surcharges, i do agree that no one here on this board even though we have differences of opinion on how to make that happen wants to see consumers charged for something and have that money be pocketed but the question that i have for you is given how you're approaching this issue, are you confident that going forward, we're going to have a situation where we can guarantee every consumer in san francisco that when they go to a business and they have to pay a surcharge, that that money will actually be used as it's supposed to, so can we make that guarantee to consumers here in san francisco? >> i think with all due respect, supervisor, i think that's going be up to you whether you want to make that commitment to consumers in san francisco, i can tell you that

we will do everything we can to enforce the new amendments to the ordinance and it will call on employers to provide surcharge data to us to the extent that they provide data that indicates that they are collecting money and surcharges for health care that they're not spending affirmatively and irrevocably spending on health care for their workers, we will do everything we can to ensure that they be require today spend that money as is laid out to the amendment of the ordinance. >> but will you be auditing these businesses? >> at this point, i think the resources are such that we are going to look at the data provided to us, to the extent that the data provided to us shows non-compliance, we are going to force those employers to come into compliance. i think it may be unlikely or unrealistic to expect we have the resources to affirmatively audit employers and what they're reporting to us or dig

into their financial books to find out whether that information was accurately reported to us. >> and i think that's the problem and i think i think the olse is committed to doing everything they can with the limited resources, but the challenge here, right, is that you're talking about businesses that for a number of years have been charging consumers a surcharge that supposedly was going to go to health care and we know for instance that the numbers as much as 80% was never spent on health care and in terms of our enforcement strategy, the strategy p0 relying on those very business thaz were charge consumers and not spending it on health care, then trusting the information they give us because there's no way we can audit and verify the accuracy of that information, and so that is the challenge here, and even though i understand the intent and the

spirit in which the amendment was made, i simply respectfully submit that that is not enough in terms of ensuring that when a consumer in san francisco pays more to provide health care ensuring that in fact that's what happens and it's not an issue of the olse doing what it can, it's simply the system is designed. >> i want to share with you briefly the information that we did collect from employers about surcharges in 2011. this was the first data that's been collected systematically about surcharges, as we've said, this is regarding 2011 prior to the effect -- effective date of the amendments, 172 employers, approximately 5% imposed health care surcharges to the tune of 14.7 million dollars, that's an average of 86 thousand dollars

per business in surcharges collected for health care. 78% of those employers made use of health reimbursement accounts, so that's a large discrepancy whereas only 20% of the general universe of employers utilized those. of those 172, 101 of them reto us the surcharges they collected were greater nan the health care expenditures they made on their employees, that's the pool of employers, if they reported that same exact data to us in 2012, we will in fact proactively or based on that supply of data ensure that that money get spent on workers. essentially, you know, that's the surcharges of that group of 101 employers who again were the surcharges exceeded the

health care, 11.4 million dollars in surcharges were collected, their true spend khurs on health care were 5.1 million, thus there was a net difference there of surcharges collected in excess of health care spend khurs of 6.3 million dollars, so in essence, that's the summary of our report of the new data we've collected. i do want to emphasize that the olse in addition to doing the compliance data that we do -- the compliance work we do on a day in and day out basis, since there's been some discussion about it, the enforcement we've done to date on the health care security ordinance has resulted in over 7 million dollars, 7 million dollars going to over 6 thousand workers in health care expenditures to those workers that were previously not made in violation of the ordinance, so we have a very busy and active enforcement effort, in addition to the enforcement work, we've done a lot to do

education and outreach around the amendment. there was a general consensus when the amendments were passed, the olse was very quick to put out guidance to the business community and the employee community about those changes, we have developed outreach strategies by e-mail, we have responded to thousands of e-mails and phone calls coming into our phone lines, we have done webinars to work with employers to spread the word about these new provisions and ensure they will be robustly taken advantage of by employees and make sure employers will be in compliance to them >> you talked about more than half of the employers that self-proported placed specifications on how these reports can be used and there's

been discussion on how we have to wait to see data for the 2012 year, my understanding is that the amendment that was passed does nothing for restrictions which is one of the biggest issues we were trying to address. do you think in light of the amendment that was passed, that the issue around the restrictions would be different a year from now or two years from now? >> i'm reluctant to speculate, supervisor compos on what the outcomes are there, i do believe part of the amendments centered around federal preemtion, it is right that the ordinance now sets forth that all these hra contributions have to be" reasonably kl

collated", which i think those provide some leverage or possible capacity on the part of olse, for example, hra couldn't bourses that were vastly and unduly restrictive would arguably run a foul of that provision when coupled with other factors would be not deemed calculated -- >> let me ask it to you this way x if the information for 2012 was for 2012 instead of 2011 and you have as you have here 53% of businesses putting these restrictions on the use by these workers of these accounts, so if 34% of these businesses said you cannot use it for health insurance, i mean, if the data was for 2012, would that be in violation of the amendment that was introduced? >> well, it's not facially a violation, and so i think you're trying to etch size the

point that the amendment did not directly outlaw or prohibit restrictions, to the extent that they must be reasonably calculated to benefit the employee, we can give that consideration and look at the totality of the circumstances to see if the violation is there but it is right that the amendment did not facially address prohibition or use of restrictions. >> thank you. >> thank you very much. do you have any other questions? >> just one quick thing i want to mention, i want to thank the advocates for workers here in this room during the budget process brought to our attention that i think olse because we are putting more auditing and compliance requirements on you, i believe we increased our budget to your staff for these types of theft issues, enforcement of this statute to a tune of over half a million dollars and i want to

again state to you as well as to advocates here in this room, if that is an amount that is not adequate for compliance education and outreach work, i certainly want to learn more about that, from my perspective, we are entrusting you with additional funds to you can go out and ensure that these laws we placed on the books are taken care of. >> and just a point on that, my understanding is that a lot of that money will deal with the backlog that olse has -- adding additional resources. >> we have a number of other departments, olse had a lengthier presentation, hopefully we can move more expeditiously in the other departments. so, we'll now move to the department of public health. welcome. >> thank you so much,

supervisors, i want to give you a sense of the city option we've been talking about, then go into the department of public health response tos the civil grand jury report, so we used the term healthy san francisco broadly within san francisco, but we're really talking about from the department's perspective in terms of our response, the city option. that is the option that allows an employer to indicate that they would like to contribute dollars to the city and county of san francisco and their employees will get either eligibility for healthy san francisco and enroll in that program or their employee is not eligible for healthy san francisco either due to age or residency or perhaps they have dependent coverage and they will get a medical reimbursement account. to date, since the implementation to have employer spending requirement, a little over 1400 employers have selected the city option.

of those employers and the funds that they've contributed, 62% have gone to medical reimbursement accounts, so most employees in the city option get medical reimbursement accounts during the 2011-12 fiscal year, there was a 13% increase in the number of employers that have selected the city option in order to meet the mandate. as was indicated before, in terms of the utilization of the medical reimbursement account for fiscal year 2011-12, it was 55%, so 55% of employees use those accounts to reimburse for a range of health care expenditures. we have structured the medical reimbursement account so that there is not fi kaition that is multilingual, allows for wide base reimbursement for health care services including